July 04 2020
Hospitality sector set for boom after a decade’s lull
29 April 2019

Better times on the horizon as demand outstrips supply

After a decade, the Indian hospitality sector seems to be heading towards a boom.

With demand outstripping supply and room rates showing an increase, the hotel industry is expected to see better times.

“The ongoing general elections could dampen some of the sector’s otherwise upbeat performance in 2019. However, the tide is set to change as market sentiment can recover with the aid of a stable government, post the elections, to support the required economic growth,” said Mandeep Lamba, president (South Asia), HVS Anarock.

“Banking on this important factor and considering limited new supply in 2020, the hotel industry can record its highest-ever recorded occupancy and is expected to outpace 2006, which was a superlative year for the hotel industry,” he said.

In 2019, it is estimated that 8,574 new rooms will enter the market, 19% higher than in the last two years.

Gross Operating Profit margins of hospitality firms are likely to improve 8% and supply is expected to grow 4%, compared to a demand of 7%, HVS Anarock said in its India Hospitality review.

In 2018, the average room rate grew 6.25% and for the first time in many years, the industry-wide ADRs in 2018 grew at a rate faster than the long-term inflation rate of 4.5%, suggesting that the sector is on a steady path of recovery. In the last two years, hotel supply grew by 3.7% and 3.5% respectively, while demand grew by 7% and 6.8% respectively, as per HVS Anarock data.

Rebranding for future

Rebranding of hotels is expected to continue, as in 2018. That year, several properties were rebranded after dissatisfied owners migrated to a new operator. “The significant jump in 2018 and 2017 hotel openings over 2016 was partly a result of rebranding, the most notable being the migration of a 14-hotel portfolio with 2,000 rooms by SAMHI Hotels to Holiday Inn Express. Rebranded openings accounted for 24% of the openings in 2018,” the report said.

Pascal Gauvin, MD, IMEA, IHG, said, “Holiday Inn Express Gurgaon Sector 50, which has been open for six months, is operating at 21% above the forecast RevPAR.”

“With recent openings, we now have 27 operating hotels under the Holiday Inn brand family in India, and a pipeline of 33 hotels due to open in the next 2-3 years.”

Ashish Jakhanwala, founder, MD & CEO, SAMHI, added, “We have conducted one of the largest re-branding exercises in the Indian hospitality industry.”

According to analysts, the midscale space is seeing traction in the market and new hotels are coming up in this segment. The economy segment is being taken over by new entrants like OYO, Treebo and Fab Hotels, a space vacated by Ginger.

The industry, which recently witnessed two major acquisitions of stressed assets — Leela Venture’s 4-hotel acquisition by Brookfield for ₹3,950 crore and Keys Hotels by Lemon Tree and Warburg Pincus for an undisclosed sum — is expected to see further consolidation. Hotels M&A are estimated to touch $800 million.



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